Stripe making conventional banks replaceable

Source: Stripe Newsroom

In capturing this vast market, the future will unfold in one of the following two ways: 1) a conventional bank acquires and integrates a slew of fintech companies, essentially becoming a giant fintech company themselves OR 2) a massive winner in the fintech industry acquires other fintech companies in different verticals and offer the one-stop service. Although the likely scenario would be the former (because it is the incumbent and it already offers a one-stop solution), I think the latter still has a good chance of happening.

As stated in the first point in the excerpt, my anticipation for the conventional bank acquiring promising fintech companies and offer the technology to their existing customers. This to me seemed more feasible because it was difficult for me to vision how any single fintech company would build a company that can compete/threaten the conventional banks both in terms of a scale and breadth . But the introduction of Stripe Treasury shows that I may have been wrong (or even underestimated the fintech companies) and that the industry, specifically Stripe in this case, is heading towards a bigger and smarter direction than I had imagined.

Consumer Finance

Like it or not, no one can live without the financial system. It is the medium between our human needs/desires and efforts to obtain those needs/desires. For instance, we get paid for work that we do and spend the money on things like food and entertainment. In the middle, there is a financial institution we call ‘the bank’ that enable this exchange or transformation.

Figure 1

The New Eco System

As stated, Stripe’s decision to win the minds of the developers is becoming increasingly relevant because individual websites are being consolidated into platforms such as Shopify that offer complex features (such as integrating payment systems, inventory management, accounting…etc) easily accessible to non-tech savvy business owners. In other words, developers of large platforms such as Shopify, are becoming the sole decision-maker on which payment processing software to use for their platform and the business owners are excluded from this decision. Hence, the existing brand awareness and market share, the competitive advantage of PayPal over Stripe, is becoming less significant whereas the developer friendliness, the competitive advantage of Stripe over PayPal, is becoming increasingly important.

Source: NASDAQ
Figure 2 The emerging eco system

De facto Network

The next step for Stripe, in my opinion, after firming the payment processing market for online businesses, is to become the de facto network of the entire vertical of the consumer financial industry by capturing the final leg: the end consumers. This would transform the industry to become Figure 3.

Figure 3

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